Digital exchange platform NFC Indonesia seeks to raise Rp 333.33 billion ($24 million) in an initial public offering in July to fund business expansion, invest in human capital and improve its IT systems, the company said last week. (Reuters Photo/Beawiharta)

Amid Turbulence, Large Institutional Investors Pledge to Stay in Stock Market for Long Term


AUGUST 25, 2015

Jakarta. Large institutional investors, including  employee insurer BPJS Ketenagakerjaan, pension funds and the Indonesia Investment Club, backed by non-banking financial institutions, say they will not cut and run despite the recent turbulence in the stock market.

“If we also panic and get out of the market, the Jakarta Composite Index will slip further,” Mudjiharno, the chairman of Indonesia Pension Funds Association (ADPI), said on Monday.

He said that cutting their losses would prove a long-term disadvantage for investors, who would have to buy stock at a higher price once the market rebounded.

Pension funds held combined assets of Rp 199 trillion ($14.1 billion) as of the end of June, of which Rp 190 trillion is invested in various portfolios, including stocks, term deposits, government bonds, central bank debt papers and direct property investments.

Mudjiharno said pension funds typically took a long-term view of their investment plans, so they were unlikely to dump their stocks amid the current market rout.

“If listed companies decide to make a buyback, that’s even better [for stabilizing the market],” he added.

State-Owned Enterprises Minister Rini Soemarno said separately on Tuesday that SOEs were preparing to buy back up to $700 million in shares from the public.

An official from BPJS Ketenagakerjaan, Indonesia’s biggest institutional investor, confirmed that the social security agency would jump into the stock market to pick up stocks on the cheap.

“The price of shares currently has been relatively cheap,” the official said.

BPJS Ketenagakerjaan has Rp 203 trillion worth of assets, from funds paid in by workers and employers, of which Rp 197 trillion has been invested in stocks and government bonds, among others.

The JCI entered bear territory last week, extending its losses on Monday when the index closed down 4 percent to hit a 20-month low.

The rout, which has seen the JCI drop more than 20 percent since the start of the year, has prompted the Indonesia Investment Club to consider buying into listed state-controlled firms.

“The majority of them are prepared to buy stocks of state firms in the energy sector, like PGN and Bukit Asam,” said a source who asked not to be identified, adding that this commitment was conveyed to President Joko Widodo during a meeting with business leaders on Monday.

It is not immediately clear how much in combined funds are managed by members of the IIC, which includes state-controlled non-bank financial institutions such as financing company Sarana Multigriya Finansial; export-import agency Indonesia EximBank; civil servant pension funds Taspen and ASABRI; pawn shop chain Pegadaian; and infrastructure guarantee fund Penjaminan Infrastruktur Indonesia.